this this week, the starkest evidence yet of a stalling economy.y. >> our economy as a whole is not producing enough jobs. >> a series of setbacks, first friday's dismal jobs report and last night another blow as house speaker john boehner pulls the grand barragan for debt reform off the stable. a stormy launch of the high-stakes negotiations at the white house. >> we are this far apart. >> our headliner in a "this week" exclusive. the president's chief of staff bill daley, takes us inside the tense talks to keep america from defaulting on its debt for the first time in history. and our "roundtable" tackles the high stakes politics at play. then the new imf head christine lagarde on the grave risk posed by a u.s. default and

dominique strauss-kahn's spectacular fall from grace. plus the shocking scandal shaking britain and threatening rupert murdock's media empire. >> announcer: live f fm the newseum in washington, "this week" with christiane amanpour starts right now.. welcome to the program, lots to get to today. but first some major news in the high-stakes negotiations over raising the debt ceiling. late last night house speaker john boehner abruptly reversed course and abandoned the debt efefrt to strike a sweeping $4 trillion debt reduction deal with president obama. boehner is pushing for a scaled package, a move that received stiff oh position from the democrats, all of this hours

before the speaker and president meet face-to-face a new round of talks. abc's jonathan karl joins us with more. where do things stand heading into tonight's meeting. >> reporter: a compromise that would have dealt with the debt crisis is dead but there's major negotiation to be done. le federal government is three week as way of hitting the limit how much money it's allowed to borrow. even without the profit spekt of crafting this big, grand compromise, the president and and congressional leaders need to negotiate to raise that limit. they're e manding 2 trillion in spending cuts be made to give the president the increase he wants and democrats demanding any deal to cut spending like that has to include an increase in tax revenue. the big question, going into tonight's meeting is whether a smaller deficit reduction n dea is possible. both sides are saying it can be done. failure to do it would lead to economic meltdown. >> jon, thank you very much. joining me to discuss the road ahead is the white house chief of staff bill daley. thank you very much for joining us.

you've heard what jon said. you've seen what speaker boehner has done last night. what's your reaction to the deal being pulled right now? >> it's very unfortunate the speaker made the comments he has. the president is committtt to solving this deficit possible for the future of america. he's looking forward to the meeting to play out his case. he's saying, it is time now to make the tough decisions. in this town, generally they kick the can. nobody wants to do the tough things. he's committed to do that. he's not giving up on trying to bring economic sanity to the city and that's his goal. >> is he still committed to the mega-deal, so to speak? because this is what is floated in the last several days that speaker boehner said no longer possible. will the president continue to push for that? >> the president believes it is time to solve this problem. time to give confidence to the american people, give confidence to the world. obviously no one wants a default. we shouldn't be close to this situation but it is a result of

congress's republican, democratic, republican presidents and democratic presidents who committed the country to certain bills, they have to pay them off. the president is dedicated to brbrging financial soundness. that's a big deal. a lost pain, politically. democrats are very upset that the president talked about paying on their side of the aisle, and republicans are saying, no way will be give tax relief to middle income american, they are concentrating on bringing tax relief to the wealthy. >> just to be clear. $4 trillion is what the president will go for, a big deal or will he try to go for something smaller? >> everyone agrees that the number around $4 trillion is a number that will make a serious dent on our deficit. it will send a statement that the u.s. has gotten hold of their fiscal problems and moving forward. give confidence to the american people. give confidence that we can move forward over the next couple of

years to bring economic soundness. that's the president's commmmment. that's what he wants to see. he'll talk to the leaders again tonight. he's not one to walk away from a tough fight. this is a very tough political fight. no question about it. he didn't come to this town to do little things. he came to do big things. >> he came to do big things, you say. it is a big deal, this $4 trillion, and it would require a lot of complex negotiations. why is it, then, that he came to it quite late? >> he didn't come to it quite late. not at all. >> he didn't come to the urgent aggressive negotiations quite late. >> that's not true. he laid out a budget in february, he laid out in april after congressman ryan and republicans put their budget forward which basically changed medicare as we've known it in the contract with americans that's been there now for 70 years. he came and laid out a $4 trillion plan in april. his message is repeated. we've been in discussions and

negotiations. he had the vice president after meeting with the eight senior leaders in april, late april, early may, have a pros toes move forward. that went up until ten days ago or so. and then the republicans decided they would back out of that. again, because they are trying to make a statement about the -- their position that no revenue can be in any deal. we're fighting to try to bring tax relief to middle american, and that's not -- that's the heart this debate right now. >> so you're talking about -- the republicans saying no tax revenue, no new taxes. democrats are also saying no cuts to -- >> the house -- >> the house, some democrats are saying -- this president is saying it has to be a balance approach. >> does the president still call for cuts and changes to medicare, social security? is that still on the table? >> social security is not about the deficit. >> medicare -- >> medicare has to be strengthened. it will run out of money in five years if we don't do something. obviously, there has to bebe improvements.

there has to be, at the same time, a balanced package. it's not just about medicare cuts that some people want to see. we've had a contract with the american people for the last 80 years about medicare. people pay into that. they expect certain benefits. they don't want to see that trashed. it's a difficult time for many americans. this town seems to get stuck in the politics. you get out in america, people are concerned. they want certainty, this president is fighting for them and not the usual game in this town. >> so, going forward then, what will you be trying to negotiate tonight? will entitlements be on the table tonight? will there be any chance with the republicans of any kind of revenue? >> that's up to the republicans to decide whether or not their plan is to just kick the can. >> for the democrats? >> for the democrats. for this president, he will be, once again, stating his strong belief that in order to bring fiscal soundness to this country, there must be a balanced approach. we all under no actions we'll

take right now should be short term that impact our recovery, albeit slow, and nowhere near as strong as we would like. there's no attempt to do anything short term other than bring relief. extend the payroll tax which is give $1,000 to each american to extend that. that will help the economy and help the american people. there are things we can do in the short term that will bring relief. this debt was created over a long period. again, by republican, democrats. this will have to be solved over a long term. this is the time to do it. our president believes that the call to the leaders is to step up and be leaders. a very wise man once said he didn't come to this town to have a title. he came to do big things. this president is committed to do big things. >> do you believe there will be a deal to avert a default by the 22nd of july or the 2nd of august? >> by the 2nd of august there's no question in my mind the leaders of america will not

see the first default -- will not allow the first default in the history of the country to occur. i'm confident of that. this is not just about the debt ceiling being extended. this is about bringing fiscal soundness so the world and americans can know that we can solve our problems ourself and do it in a way that there shared pain, and there is shared responsibility. and that's what the president is fighting for. >> in the meantime, for machines, the job situation is really critical. we saw grim numbers again on friday for the june numbers. that followed grim numbers of may. then we were told, on this program, and elsewhere, these were head winds, bumps in the road. speed bumps. do you think the grim numbers now, reflect, an unfortunate trend that's developing? >> there's no doubt these numbers are very negative. on the other hand, there are some positive things out there. you can't have job growth if the overall economy is not growing.

i do firmly believe that one of the wet blankets on this economy and on company, on the system right now, is a question, as to whether or not our political system, whether the leaders can get together, whether they can solve big problems or they're going to just kick the can. if i was a business owner, trying to make a decision on an investment, i would have little concern whether this political system -- if you look at the statements of the ratings agencies who have questioned the fiscal soundness of this country, it's about our political system, not being willing or able, seemingly, to take on big tasks. >> your long-standing relations, and your history of professionalism here, is with the business community to a large extent. what do you say to them? you were meant to be able to sort of convince them to start investing and hiring people. instead, they're racking up profits doing cost-cutting and not hiring. this is a problem for the employment rate. >> there's no question that

there's a tremendous amount of profit on the company's books. but they are looking to see the signs of confidence for them to invest. every major company does that. i talked to business leaders every day. they don't have as n native an attitude about the economic situation that they know it's difficult that washington seems to have. on the other hand, they want to see leadership. what i say to the business community, you can complain and whine about the political system all of the time. get t volved. and make the statement about the fafa that you need a balalced approach, to solve our fiscal problems. it is not going to be solved -- it should not be solved on the backs of thoho who have given and having a difficult time right now. >> given their legitimate concern, what is your prediction for employment next month and the month after? >> i'm not a predictor, nor would i be stupid enough to try to guess what the numbers are going to be. i think there's plenty of signs. whatever the numbers are positive.

we are coming through, the worst economic crisis since the great depression. when president obama came in, there were almost 800,000 jobs a month were being lost. that's the size of charlotte, north carolina. 4 million jobs have been lost the previous. 13 months before he came into office. this country was in crisis like very few people had ever seen. and we are slowly coming out of that. albeit, it is frustrating to this president that it's not coming fast enough. but a lot of that is based on this dysfunction that seems to be going on in this town and that gets felt throughout the country and there's a lack of confidence whether these political leaders will have the guts to stand up and do the tough things. >> let me turn to pakistan, quickly, there's an article in the "new york times" today, saying that the money is being reduced to pakistan, hundreds of billions of dollars. the president came in, saying that he would agree to bring pakistan to the table with more aid. has that policy failed and is therera change of policy now?

>> it's not changed -- it's not failed, pardon me. the truth of the matter is, our relationship with pakistan has been complicated. obviously, they're an important ally on the fight of terrorism. a victim of enormous amounts of terrorism. right now they've taken steps to given us reason to pause on the aid which we're giving to the military and we're trying to work through that. it's a complicated relationship and a very difficult complicated part of the board. obviously there's still a lot of pain that the political system in pakistan is feeling by virtue of the raid that we did to get osama bin laden. something that the president felt strongly about. we have no regrets over. but the pakistani relationship is difficult, but it must be made to work overtime. until we get through difficulty, we'll hold back some of the money that the american tax payers are committed to give.

>> $800 million. >> yep. >> on that note. william daley, thank you for joining us. >> thank you. up next the "roundtable" weighs in on washington. partisan paralysis as the recession stumbles. will anything get accomplished on the job, on debt? and which party will pay the political price on this grid lock? lots of questions. we'll have the answers coming up. lots of questions. we'll have the answers coming up. to on a top secret project. it was a challenge that nobody had undertaken before. and we didn't know whether we could do it. when kennedy announced we're going to go to the moon, that was a thrilling proposition. they said, if you could start a computer over from scratch, what would you do? i thought, wow, this could really change things. if you have time for a story, i'll tell you why.

back in april with a government shutdown looming. republican senator kay bailey hutchinson issued a warning. the fiercest fight is yet to come. the battle over raising the debt ceiling will be, quote, armageddon. welcome to armageddon. washington is in the thick of it. the plot is thickening, parties more polarized than ever and the world is watching. here with me. george will. democratic strategist, donna brazile, and al hunt, and the executive washington editor of bloomberg new, and abc's political correspondent jonathan karl. thank you all for being here. george, you heard what william daley said. blamed it on politics for the collapse and said the president will still go for the big deal. >> this is politics. we have two party force a reason. they have different views for the proper scope of government. the government has its own litmus test. we're here to defend the

structure. the republicans said we did not win the last election other than to shrink the government. thth w wt to shrink the deficit and the government at the same time. part of the problem is, i think the american people are suffering apocalypse fatigue. they've been told over the last 40 years, they're going to die from nuclear winter, global cooling, global warping and they hear this is armageddon. i don't think they believe it. >> george, they're suggesting there's not a big catastrophe looming if the u.s. government defaults, every economist, including head of imf, not liberal and spending organizations, but organizations are really worried. do you think there's a deal in time? william daley said he thought there would be. >> if you talk to republican leader, not rank and file, he said there's got to be a deal, it's unthinkable there won't be. apocalypse, we're spending more than 40 cents what the government spends is borrowed

money. you've got to have a deal. and any impartial observer know what that has to include, which is cuts to the growth of titlement spending. that's the direction they were heading in. and very forces that got us in this mess in the first place made it impossible. >> if the president, and he's floated the idea he's willing to look at entitlements, which everybody said h h to be on the table. i suggested to bill daley that the president is late to the actual hard negotiation, and he honestly pushed back on that. but he has been sort of push into this debate by hard ball republican tactics, on rereblican terms right now. >> well, there's no question. >> but coming into the debate at the time the president showed up, the republicans had already framed the narrative and it's cut, cut, cut. we can cut our way back to prosperity, nor can we cut our way to creating the kind of jobs that we need to sustain us in thth21st century. here's the problem. the republicans get cold feet

every time you talk about raising revenue. every time you talk about closing loopholes. talk about taking away something fromomhe wealthiest americans. democrats get cold feet when you talk about entitlement programs. george, every two year, or every year we have a budget debate. that's where the partisans come in and pick their sides and do this. this is about the full faith and credit of the united states of america. we should not play political games. something as serious as risk and default. there's one thing i worry about. that is our credit rating. moody said last month in june, if the united states -- you know, the politicians don't get their act together. they are threatening to reduce our rates. that will have serious implications for us in the future. >> for each and every individual american. interest rates will go up. unemployment will go up. we'll hear from christine lagarde on the global ramifications of this in a moment. al, where does one go now?

if it's just politics, if the holy grail of taxes and entitlements are now going to be in play, what happens? >> they have to be in play, or they are not going to do anything substantive. it may not be armageddon but a default would be cataclysmic. i agree with jonathan, there's no economist who doesn't believe that. even in short term default. do you choose between chinese bond holders and veterans? that's not a choice we want to make. so that's something, i suspect, they may have to go a few times and have it rejected and they'll probably have to do something rather cosmetic. the idea of a small deal, 2 trillion, 2.5 trillion still involves entitlements and taxes. joe biden never agreed to anything that didn't revolver taxes. all it does, it's 60% of the big deal and it's just as complicated and difficult. in the end, if you want to do something substantive. there's no way you can do it without entitlement and added revenues. same reason willie sutton said

while you rob bank, that's where the money is. >> this short-term deal will be really difficult to pull off. $2 trillion, a lot of money as al points out. the problem is, you have 30 to 50 republicans in the house that votes no on any increase in the debt ceiling, period. that means you need 20, 25 democratic votes on this thing. if you're doing anything to touch entitlements. nancy pelosi made it clear, no go. >> first of all, social security did not cause this. but democrats have been very clear that we cannot simply back -- continue to cut programs that benefit the middle class, that senior citizen, people with disabilities, without putting everything on the table. republicans, every time you put revenues on the table. they walk out, they say no deal. we want a short deal. a short deal is a cop-out. >> everybody knows entitlements have to be in play as well. if it hadn't been fort hardball negotiations, the president

would not talk about entitlement. >> he put it on table. republicans came in the road and got the appetizer and said, you know what, main course, we'll just walk away. maybe the president will serve dessert. because after 6:00 that should be cooking. >> let's have a can metaphor. leles look who is kicking the can down the road. democrats started kicking the can down the road when they stopped writing budgets. the president kicked the can down the road by appointing deficit commission. then submitted a budget in february that no one on either side of the house would support the promise to increase the deficit. that's a lot of kicking. that's can abuse. >> let me ask you. you've done reporting. speaker boehner obviously has a hard time with his group in the house. you said one of the things that were being considered in this mega deal where both the president and speaker boehner were talking about a mega deal was about some kind of revenue increases as well as entitles on the president.

>> $4 trillion in deficit sending, about a trillion of it coming from tax revenue increases, republicans s sply call those tax increases. the speaker was willing to consider this. at that white house meeting thursday, eric cantor said, i will not support a deal like that and most much the republican conference in the house will also vote no. >> they get cold feet. every time you talk about raising revenues, they get cold feet. we have to have both in order to -- >> in the meantime, the obsession with the deficit is, american people say, at the expense of focus on jobs. >> it is, i think george is absolutely right about how obama has handled this. i would also point out it was eric cantor who walked out of the small gargan, out of the $2 trillion deal. this is the second republican to walk out. i don't know of anyone, anyone who seriously thinks you can solve this, or begin to deal with this, unless do you it on a bipartisan basis. this is not going to be passed, and every single group has looked at it.

you have to have entitlements and taxes. and that's what eric cantor and nancy pelosi won't face up to yet. >> so, about job, how are theyey going to move that from where it looks to be trending now, which is not in a very positive e direction at all? >> talking about being able to walk and chew gum at the same time. what they have to try to do is have short-term stimulus, mainly for the tax code and long-term deficit reduction. that may not be easy for people to under. i don't think many people, whether marty feldstein or liberal economist thinks they ought to begin cutbacks in this economy. whether tax increases or significant spending cuts. they ought to be done a year or two down the road. that's kicking the can down the road but that probably makes economic sense. >> moratorium, please. let's look how bad the jobs numbers are. go back to may, first of all. in may, it created only 54,000 jobs which is terrible. then revised the main numbers down to 25,000 jobs.

the june number is 18,000 jobs. you need seven times that many just to stay even with the natural growth of the work force. 16.2% is the unemployment, the understand under employment. dropped out of the labor force unemployment rate. there are 2 million fewer private sector jobs in this country than mr. were before the recession began. when obama was inaugurated unemployment rate was 7.6%. >> first of all, george, for the first two months, we created 200,000 jobs a month. in of may we hit a speed bump. every time we create 57,000 private sector jobs then lost 39,000 public sector jobs. the president laid out immediate things congress can do to get people back to work. also talked about trade agreements to get people back to

work. extending the so-called payroll tax by two points. >> tax reform he threw in there. >> but the question is, what will it take the private sector to create more jobs, and another stimulus might help alleviate short-term pain at the state and local level where they are basically reducing jobs across the board. >> let the record show that the president came out for a tax cut that is extending the tax cut on -- >> he came out with 17 tax cuts and republicans opposed 16 of them. he's been walking your walk, but not talking your talk, clearly. >> this is going to continue in the green room. thank you all so much. and coming up, global anxiety over the prospect of american debt default. my exclusive interview with the new head of the international monetary fund christine lagarde. she took over for dominique strauss-kahn who is battling attempted rape charges in new york. her take, next. >> announcer: this week, with

christiane amanpour, from the newseum in washington, d.c., will continue in a moment after this from our abc stations. abc stations.

with the debt ceiling headline growing close. global markets are bracing for the unthinkable, the possibility for the first time in history, the united states will be in

default. keeping close eye is christine lagarde. the newly installed head of the international money fund. the imf is trying to stabilize three european countries teetering on the brink of econonic collapse. portugal. ireland and of course greece. but american default would be in another league. madam lagarde wasted no time this week getting right to work. top of her agenda, insuring that greece continues to implement painful structural reform, and that it does not default and send the rest of the world, including the u.s., into another economic tailspin. the imf will be on the front line if the u.s. fails on its obligations. the organization was created after world war ii by the united states and its european allies to oversee the global economymy and be a lender of last resort to countries in trouble. it's meant to insure financial stability and promote global employment and growth.

but it's still reeling from the drama surrounding lagarde's predecessor, dominique strauss-kahn who resigned six weeks ago amid allegations that he had sexually assaulted a hotel maid. that case is now in question because of doubts about the accuser's credibility. a lawyer by training, lagarde is not only the first woman to o ad the imf. she was also the first chair woman of a major american law firm in chicago, having attended high school in suburban washington, d.c. later, she was a member of the french national synchronized swimming team, a long-time champion of diversity, she had this message when she took the helm at the imf this week. >> for all of the young girls that are in school at the moment. i would like to say that they should each consider that >> thank you for joining us, congratulations, the first woman head of the imf.

let me first ask you about the current crisis in the united states regarding debt deals and raising the debt ceiling. does the rest of the world believe that the u.s. is going to get its act together and raise the debt ceiling and conclude budget negotiations by the deadline of august 2nd? >> certainly from my vantage point, there is expectations that that will be the case. otherwise, it will be a real shock and will be bad news for the u.s. economy. i would hope that there is enough bipartisan intelligence, and understanding of the challenge, that is ahead of the united states, but also, of the rest of the world. >> when you say "shock" what do you mean? describe it? what would happen if the u.s. >> well, i can't imagine for a second that the united states would default.

but, clearly, this issue of the debt ceiling has to be resolved, because otherwise, there would be a hike in interest rates there, would be a much heavier burden to be bourne by all of the u.s. tax payers at the end of the day. >> economists have said it could cause an immediate big collapse of the stock market. it could really exacerbate unemployment not only here in the united states but elsewhere as well. it would have real big and darar consequences. do you agree? >> if you draw the entire scenario off the default. yes, of course, you have all of that. interest hike, stock markets taking a huge hit and real nasty not just for the united states, but for the entire global economy, because the u.s. is such a big player, and not so much for other countries. >> does it threaten to jeopardize the u.s. position as the world's most stable economy? >> i don't think it would jeopardize the u.s. as being, you know, the largest economy in the world.

>> the most stable. >> it would certainly jeopardize the stability, but not just stability of the u.s. economy, it jeopardizes stability at large. that's clearly against the purpose and mission of the international monetary fund. we are concerned and very much hoping a compromise will be found before the deadline. i'm glad to see that people are talking again, by the way. >> you have become managing director of the imf because your predecessor, dominique strauss-kahn is in a legal battle right now. he's been accused, as we know of sexual assault. you have spoken about wounds here that t ed to be healed. what wound and how do you need to heal them? >> no criticism of the job that he has done in this institution, because dominique strauss-kahn has done an excellent job as managing director. but when an institution loses its managing director and such circumstances, there is clearly wounds as a result.

somemeeople are very hurt. other people feel betrayed. it's a very strange chemistry of frustration, irritation, sometimes anger, sometimesery deep sadness as well. >> you had to go through and it was widely reported an ethics talk, with the head of ethics here at imf. it's the first for the managing director. what were you told you had to do as head of this organization now? >> i'm having my training session next week. ill he' be able to tell you more. but as you know my contract states clearly i have to abide by the highest ethical principles and i have to be on my best behavior all of the time. i will try to do so. >> what does that mean for an organization that employed so many women? >> in the back of my mind, when it cops toette ethics, i

always think to myself, would my mother approve of that? and if she did not, then there's something wrong. i think it's a basic stupid principle maybe to have. but it's something quite, quite handy and quite efficient, if you think of it. when it comes to women in this organization, i have spoken to many of them already. i've spoken to representatives of the staff. and we've clearly need to all work together. respect each other. and everybody needs respect. not just women, menace well. we are a community and everybody is entitled to respect. >> you've also said, that this case, is a little bit of an anita hill moment for france. you said that there is a pre dsk, dominique strauss-kahn and post dsk. what does that mean? >> irrespective of the ultimate outcome of the case, and irrespective of the facts, and

whatever the damage, and there is damage, obviously, i believe it has helped women to appreciate that they should speak up, whenever something happens to them, that is not respectful. that is not tolerable. that's what i meant. >> do you think that that debate is open and will stay open? is. >> i don't know enough about the general atmosphere in the united states.>> i don't know enough ae general atmosphere in the united states. i've just arrived a week ago. but i can tell you, that is the case. >> absolutely. >> madam lagarde, thank you indeed for joining us. >> thank you. >> and coming up. anarchy in the uk, the latest on the tabloid scandal threatening the world's most powerful media mogul. rupert murdock on the rope. that's next. "this week" with christiane

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embattled media mogul rupert murdock landed in london on a mission to save his empire. his arrival come on the same day of the final edition of his "the news of the world" tabloid.

rolls off the presses. the culmination of a sordid story of politics, editors, to get a story at all cost. abc's jeffery kofman joins us from london with more. >> christiane, this is the final issue "the news of the world." what was the biggest selling paper in the england language. inside no ads but filled with apologies. it is much more of the story of a mi demise of a paper. it's a scandal some compare to watergate, ultimately, the question is asked what does it moon for the murdock media empire. >> reporter: if "the news of the world" covered it own demise the headline would read -- tawdry tabloid die, no one cries. the paper's cause of death? self-inflicted by the reporters, editors and owner.

media baron, rupert murdock. >> "the news of the world" was a criminal organization. for years "the news of the world" delighted and enraging, and embarrassing politician, celebrities and royals. by exposing their failings. the public loved it and sold 8 million copies each sunday, bringing in huge profits. for a decade, the paper ducked a nagging scandal about its news-gathering methods. this week, that changed. all because of this girl, her name, milly dowler, in 2002, britain was riveted by the story of the 13-year-old's disappearance. investigative reporter, nick davies of the london guardian broke the story. >> we discover during the period of time she was missing there was no explanation what happened to her. "the news of the world" were using private investigator to listen to her voicece mail. that in itself was horrid.

but when it got worse, the voice mailbox got filled up, "the news of the world" were hungry for more stories, they intervened and deleted the messages. that gave her family and police hope that she was alive. milly was later found murdered. in the country that used a sleazy tabloid technique, this was a new low. >> the milly dowler story changed the dynamics of the whole saga and made it impossible for anybody to defend "the news of the world." >> murdock controls four papers here and sky tv, the most profitable network. for three decades, politicians have deferred to him, lived in fear of his ability to crush them on the pages of his paper, until now. >> rupert murdoch is a talented businessman, possibly even a genius, but his organization has grown too powerful and they've abuse thad power. >> reporter: even britain's prime minister elected with

murdock's help, scram manied to distance himself. >> we are no longer talking about politicians or celebrities. we're talking about murder victims, terror victims having their phones hacked into. it is absolutely disgusting. >> reporter: and there was more. paper hacked voice mails of the families of britain's soldiers killed in iraq and afghanistan. for celebrities that saw their cell phones illegally hacked and been exposed to people offal world, finally people were listening. actor hugh grant smoke out on the bbc. >> you didn't care who got hurt as long as you were able to sell your newspaper. >> reporter: that's paul mcmullin, for more than a decade, a reporter and editor at "the news of the world." >> would you stop at anything to get the story? you would do anything. >> even breaking the law? >> absolutely. >> reporter: we learned they made it an industry, allegedly

bribing police for scoops and hacking as many as 4,000 people's phones. on friday, the arrests began starting with andy colson former editor of "the news of the world" and he would become spokesman for david cameron. he now conceive thad maybe politicians and police have been a little too cozy with the press baron. >> we've all been in this together. party leaders were so keen to win the support of newspapers we turned a blind eye to the neat to sort this issue. the people in power knew things weren't right but they didn't do enough quickly enough. >> this morning, murdock arrived to try to contain the damage. his son, james, could mace criminal charges and a massive deal could be the next casualty. murdock's takeover of sky. has been approved last week. murdock's life work, building the largest media empire, faces what may be its biggest threat

ever. for "this week" jeffrey kofman abc news, london. so in this incredible story of politics, power and criminal allegation, where does rupert murdock go from here? joining me, michael wolff, and the man 0 who owns the news, inside the secret world of rupert murdock. nina totenberg, and steve brill, founder of journalism online and courttv. his book is called" class warfare." thank you all for joining me. let me go to you first. rupert murdock finally got on a plane and went to london. what is he hoping to do? >> we should note how long it took him to get on to plane. rupert is not a reach-out guy. he's quite the opposite. it's all about meeting power with power. so he's in very awkward and difficult territory for him. he's got to negotiate. he's got to soothe. he's got to explain all of the things that he doesn't do well. so he's there now, i think trying to get --

>> is "news international" at risk? >> i don't think "news international" is at risk. these are good assets. what is at risk is management of this company by people named murdock. >> that's interesting. steve brill, you had an interest with him as an investor with one of your organizations. >> which he sold and made money on. i don't owe him any favor, so -- >> you know him and you know his business. it was extraordinary to hear one of the future editors in that piece, paul mcmullin, admdm that they would do anything to get a story, including breaking the law. do you think it's conceivable that the head of news international. rupert murdock's lieutenant, rebecca brooks, who is refusing to resign, is it possible that she didn't know about this as she's saying? >> anything's possible. what i would like to know, what

i haven't seen written anywhere, what stories came out from this kind of phone hacking of the kidnapped girl. if stories came out from that phone hacking, andndf the editor of the paper, look at those stories before they said to the reporter, how do you know this or how do you know that, any good editor is supposed to know how reporters get their stories. but, so far, we don't know any of that. >> and, nina, what do you -- what impact do you think this has, not just on murdock's empire but the sort of tabloid culture there and even here, if at all? >> tabloids will never go away. they are part of the history of, at least a western democracy, but, it does show you, when politicians, and the news media, are completely intertwined, not just get i ibed together, bebeuse they've always been in bed together a little bit. but their ownership is intertwined with the power of the press, it can get to be a very dangerous proposition, reading how frightened the leaders were.

to even challenge murdock. in italy, i suspect berlusconi would be gone, except he owns -- the prime minister, would probably be gone, except that he owns most of the television media there. we're lucky we have not experienced that in this country yet, anyway it speaks to the need for a diversity. has nothing to do with the politics of rupert murdock. has to do with a certain view or person or entity owning anybody or anything. >> there is an, in the united states. again, we don't know who knew what and in the aftermath of the dsk thing, we shouldn't really speculate. but, the news corps has a lot of fcc licenses. there is still a clause in the federal communications law that requires you have to be of good character to have such a license. and i was reading last night in the approval that they gave to comcast to take over nbc. there was actually some guy who

challenged the character of comcast, because when they installed a cable system somewhere, they had hurt his buildingngnd hadn't paid for it. this became a big legal proceeding, actually. so, here, i am r rsonably certain, that somemee, you know, maybe someone from the p pitical left or whoever, is going to make a big deal of, you know, whether they are fit to have their fcc licenses under the current management. >> it's not a matter of a broad, generalized anti-murdock notion of fitness. let's remember, what we have here. forget this is, on one hand, not about journalism at all. what it is, about a set of crimes. i mean, they literally committed crime after crime after crime. it's going to come back to who knew what and who knew it when. >> it's to be a culture of criminal behavior also. no matter what, get the story.

>> that's one from the interesting things. it's always been this culture and they never acknowledged it was that they were doing anything illegal. you can then say why would they have hidden it. the truth is they didn't hide it. >> you mentioned the family and said potentially it would affect whether family members continue to r r news international. give us a sense of the dynamic. james murdock. his father, rupert, what is going on in the succession there. >> you have four adult children of rupert murdock. ultimately, actually, the way it's set up.p. they each have one vote. there's no tie-breaking mechanisms. very murdockian. james is the heir apparent. he's the executive in charge of -- has been, of europe and asia. he has essentially been running the response to this scandal is deeply involved in it. he signed the original check, the payments, people who were --

huge payments which would prompt the question, what am i getting here, silence. his father has been unhappy with his management of this scandal. but, his father is -- there's a lot of pressure from the children, for the father to stay -- to not be involved, to stay out. you know, these are very accomplished, his children are accomplished, and he is devoted to them. and -- and then there's wendy, his wife, in her pososion, it's -- >> you know, to bring it back to where it really affects our daily lives, the division, if you like, or the relationship between the press, politics and power, is that an issue here as well? i mean, look, let's not beat around the bush, murdock's big property is foxnews. that has a strong effect on power, certainly within the republican power, not talking about current issues. >> let's bring us down to earth for a second.

we don't know of any of michael's speculation about the family's involvement is true. he hasn't explained why he knows that. second, you're talking about real crimes. to have that discussion at the same time that you talk about, you know, whatever we like or don't like about foxnews, i think is a little unfair. because these are just out and out criminal acts. if it turns out that people very high up in the company knew about it. that is one thing that is very serious. if it turns out that it's, quote, just the editor who is high-ranking person, but not someone named murdock, that is a different story. i don't think that has anything to do with foxnews. >> and i completely agree. it does -- >> we have to end this right now. we'll do more in the greenenoom.

very interesting discussion. we'll see how it all plays out in england. up next, of course, the "sunday funnies." up next, of course, the "sunday funnies." it moves effortlessly, breathes easily. it flows with clean water. it makes its skyline greener and its population healthier. all to become the kind of city people want to l le and work in. somewhere in america, we've already answered some of the nation's toughest questions. and the over sixty thousand people of siemens are ready to do it again. siemens. answers. with new extra-strength bayer advanced aspirin. it has microparticles, enters the bloodstream faster and rushes relief to the site of pain. it's clinically proven to relieve pain twice as fast. new bayer advanced aspirin.

and now the "sunday funnies." >> yesterday president obama held the first ever twitter town hall at the white house. i was surprised at some of the questions he made. here's the story. take a look. >> i'm going to make history as the first president to live tweet. >> reporter: he even got a question about job creation from a familiar foe. >> speaker boehner. this is from joe biden who asks, have you everrlanked on the

oval office desk. check this out. >> that picture captures is all. >> in his press conference last week president obama said maybe, just maybe the proroem with the budget is that the billionaires were, quote, enjoying the lowest tax rates since before i was born. yeah, like we believe obama was born. >> up next, we remember betty ford. next, we remember betty ford. [ dr. ling ] i want to spend more time with my patients. [ jim ] i need to build a new app for the sales team in beijing. [ mrs. davis ] i need to make science as exciting as a video game. ♪ [ jim ] i need to push out a software upgrade. [ dr. ling ] review ms. cooper's history. [ doug ] i need to cut i.t. costs. [ mrs. davis ] i need to find a way to break through. [ jim ] i need to see my family while they're still awake. [ dr. ling ] see if the blood work is ready. [ doug ] i need to think about something else when i run. ♪ [ male announcer ] every day, we set out to do more than the day before.

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we remember all of those who died in war this week. the pentagon released the name of ten soldiers and marines, killed in iraq and afghanistan. we'll be right back. we'll be right back. that's helping drive the future of business. in here, inventory can be taught to learn. ♪ machines have a voice. ♪ medical history follows you. it's the at&t network -- a network of possibilities... committed to delivering the most advanced mobile broadband experience to help move business... forward. ♪

that's it for our program. for all of us here at "this week" thank you for watching and remember you can follow us any time on twitter, facebook or abcnews.com and be sure to watch david muir on ""world news" for all of the latest information on the white house debt talks. we'll see you next week. talk

in the news this sunday morning, richmond police are trying to determine the motive for a shooting that left three men dead inside an apartment. a flawless rendezvous, space shuttle atlantis docks for the final time at the international space station. jojojojojojojojojojojojojojojojo